Coping with financial crisis

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Sometimes life throws you curve balls – the loss of a job, a partner or unexpected medical emergency can deplete savings and leave you struggling with debt. Seeking assistance is the first step towards solving your financial woes.

Use your bank, credit card statements and utility bills to get a full understanding of what you are spending, where and when.

Don’t wait ‘til you are behind in payments to try to sort things out.

With the cost of living rising, credit card debt at an all-time high and mortgage rates set for an increase, is it any wonder many Australians are struggling with debt? If this sounds like you, don’t bury your head in the sand. Taking action is the first step to alleviating your debt stress.

Debt stress can occur for a number of reasons, sometimes a series of unfortuante events such as the death of a loved one of the loss of a job can put you in financial stress. Other times your debt stress may have arisen from unwise spending or living beyond your budget. Whatever the cause, the first thing you must do is put a freeze on any new spending. It might be tempting to alleviate your troubles by whacking some new purchase on your credit card – we’ve all heard of retail therapy. Believe me, this won’t help you and you’ll soon be hit by buyer’s remorse. So, cut up that card and settle back to get a real picture of your financial situation.

Start by doing a budget. It’s time to write down your income and all of your expenses to get a clear picture of your finances. Use your bank, credit card statements and utility bills to get a full understanding of what you are spending, where and when.

Once you know what you’re spending on it’s time to prioritise. Make a list of your outgoings. How many are wants rather than needs? What are the musts (rent or mortgage, utilities, credit card payments, food) and what are the nice to haves? Is there any potential to cut back expenses to make savings? Do we really need Netflix, Stan and Amazon Prime or could we just have one streaming service or none? What about that daily coffee or lunch? Could you pack your lunch or switch to bringing coffee from home?

Don’t wait ‘til you are behind in payments to try to sort things out. Ignoring the problem won’t make it go away.

If you’re having problems making your payments start by contact your bank or service provider and explain you are experiencing hardship. Usually it is possible to adjust your loan or bill repayments to a level that is manageable for you.

It can be tempting to look for a quick fix – such as increasing the limit on your credit card, consolidating your loans or declaring bankruptcy – but don’t do anything rash.

Book an appointment with a financial counsellor. A financial counsellor will be able to advise you on your debts and can also help you negotiate with your credit providers and provide a free confidential service.

You can get more information about financial counsellors and how to deal with debt when in crisis from the National Debt Helpline on 1800 007 007.

We all know it is important to ensure we’re safe guarded against any unexpected health issues. Any of us could have a medical emergency at any time and we need to ensure both we and those we love can be taken care of, if needed. While it is impossible to know exactly how much you might need to cover both medical expenses and loss of income during a period of illness, there are things we can do to ensure we are ok.

That’s why knowing what you are available to access through Medicare and if suitable, also purchasing health insurance and regularly examining different plan options is a good idea.